G.R. No.

115324 February 19, 2003

PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK), petitioner,

vs.
HON. COURT OF APPEALS AND FRANKLIN VIVES, respondents.

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated June 25, 1991 in CA-
G.R. CV No. 11791 and of its Resolution2 dated May 5, 1994, denying the motion for reconsideration of said
decision filed by petitioner Producers Bank of the Philippines.

Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend Angeles Sanchez
to help her friend and townmate, Col. Arturo Doronilla, in incorporating his business, the Sterela Marketing and
Services ("Sterela" for brevity). Specifically, Sanchez asked private respondent to deposit in a bank a certain
amount of money in the bank account of Sterela for purposes of its incorporation. She assured private
respondent that he could withdraw his money from said account within a months time. Private respondent
asked Sanchez to bring Doronilla to their house so that they could discuss Sanchezs request.3

On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi, Doronillas private
secretary, met and discussed the matter. Thereafter, relying on the assurances and representations of
Sanchez and Doronilla, private respondent issued a check in the amount of Two Hundred Thousand Pesos
(P200,000.00) in favor of Sterela. Private respondent instructed his wife, Mrs. Inocencia Vives, to accompany
Doronilla and Sanchez in opening a savings account in the name of Sterela in the Buendia, Makati branch of
Producers Bank of the Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to
deposit the check. They had with them an authorization letter from Doronilla authorizing Sanchez and her
companions, "in coordination with Mr. Rufo Atienza," to open an account for Sterela Marketing Services in the
amount of P200,000.00. In opening the account, the authorized signatories were Inocencia Vives and/or
Angeles Sanchez. A passbook for Savings Account No. 10-1567 was thereafter issued to Mrs. Vives.4

Subsequently, private respondent learned that Sterela was no longer holding office in the address previously
given to him. Alarmed, he and his wife went to the Bank to verify if their money was still intact. The bank
manager referred them to Mr. Rufo Atienza, the assistant manager, who informed them that part of the money
in Savings Account No. 10-1567 had been withdrawn by Doronilla, and that only P90,000.00 remained therein.
He likewise told them that Mrs. Vives could not withdraw said remaining amount because it had to answer for
some postdated checks issued by Doronilla. According to Atienza, after Mrs. Vives and Sanchez opened
Savings Account No. 10-1567, Doronilla opened Current Account No. 10-0320 for Sterela and authorized the
Bank to debit Savings Account No. 10-1567 for the amounts necessary to cover overdrawings in Current
Account No. 10-0320. In opening said current account, Sterela, through Doronilla, obtained a loan
of P175,000.00 from the Bank. To cover payment thereof, Doronilla issued three postdated checks, all of which
were dishonored. Atienza also said that Doronilla could assign or withdraw the money in Savings Account No.
10-1567 because he was the sole proprietor of Sterela.5

Private respondent tried to get in touch with Doronilla through Sanchez. On June 29, 1979, he received a letter
from Doronilla, assuring him that his money was intact and would be returned to him. On August 13, 1979,
Doronilla issued a postdated check for Two Hundred Twelve Thousand Pesos (P212,000.00) in favor of private
respondent. However, upon presentment thereof by private respondent to the drawee bank, the check was
dishonored. Doronilla requested private respondent to present the same check on September 15, 1979 but
when the latter presented the check, it was again dishonored.6

Private respondent referred the matter to a lawyer, who made a written demand upon Doronilla for the return of
his clients money. Doronilla issued another check for P212,000.00 in private respondents favor but the check
was again dishonored for insufficiency of funds.7

Private respondent instituted an action for recovery of sum of money in the Regional Trial Court (RTC) in
Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was docketed as Civil Case
No. 44485. He also filed criminal actions against Doronilla, Sanchez and Dumagpi in the RTC. However,
Sanchez passed away on March 16, 1985 while the case was pending before the trial court. On October 3,
1995, the RTC of Pasig, Branch 157, promulgated its Decision in Civil Case No. 44485, the dispositive portion
of which reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J. Doronila,
Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin Vives jointly and severally

(a) the amount of P200,000.00, representing the money deposited, with interest at the legal rate from
the filing of the complaint until the same is fully paid;

(b) the sum of P50,000.00 for moral damages and a similar amount for exemplary damages;

(c) the amount of P40,000.00 for attorneys fees; and

(d) the costs of the suit.

SO ORDERED.8

Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision dated June 25, 1991, the
appellate court affirmed in toto the decision of the RTC.9 It likewise denied with finality petitioners motion for
reconsideration in its Resolution dated May 5, 1994.10

On June 30, 1994, petitioner filed the present petition, arguing that

I.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTION BETWEEN
THE DEFENDANT DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT
ACCOMMODATION;

II.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONERS BANK MANAGER,
MR. RUFO ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic.
Should be PRIVATE RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER SHOULD BE HELD
LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;

III.

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE
REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT APPEALED FROM, AS THE FINDINGS OF
THE REGIONAL TRIAL COURT WERE BASED ON A MISAPPREHENSION OF FACTS;

IV.

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN
SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS
COMMITTED BY AN EMPLOYEE IS APPLICABLE;

V.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE LOWER
COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER
DEFENDANTS FOR THE AMOUNT OF P200,000.00 REPRESENTING THE SAVINGS ACCOUNT DEPOSIT,
P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARY DAMAGES, P40,000.00 FOR
ATTORNEYS FEES AND THE COSTS OF SUIT.11

Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto on September
25, 1995. The Court then required private respondent to submit a rejoinder to the reply. However, said
rejoinder was filed only on April 21, 1997, due to petitioners delay in furnishing private respondent with copy of
the reply12 and several substitutions of counsel on the part of private respondent.13 On January 17, 2001, the
Court resolved to give due course to the petition and required the parties to submit their respective
memoranda.14 Petitioner filed its memorandum on April 16, 2001 while private respondent submitted his
memorandum on March 22, 2001.

Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum)
since all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla
was money, a consumable thing; and second, the transaction was onerous as Doronilla was obliged to pay
interest, as evidenced by the check issued by Doronilla in the amount of P212,000.00, or P12,000 more than
what private respondent deposited in Sterelas bank account.15 Moreover, the fact that private respondent sued
his good friend Sanchez for his failure to recover his money from Doronilla shows that the transaction was not
merely gratuitous but "had a business angle" to it. Hence, petitioner argues that it cannot be held liable for the
return of private respondents P200,000.00 because it is not privy to the transaction between the latter and
Doronilla.16

It argues further that petitioners Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing
Doronilla to withdraw from the savings account of Sterela since the latter was the sole proprietor of said
company. Petitioner asserts that Doronillas May 8, 1979 letter addressed to the bank, authorizing Mrs. Vives
and Sanchez to open a savings account for Sterela, did not contain any authorization for these two to withdraw
from said account. Hence, the authority to withdraw therefrom remained exclusively with Doronilla, who was
the sole proprietor of Sterela, and who alone had legal title to the savings account.17 Petitioner points out that
no evidence other than the testimonies of private respondent and Mrs. Vives was presented during trial to
prove that private respondent deposited his P200,000.00 in Sterelas account for purposes of its
incorporation.18 Hence, petitioner should not be held liable for allowing Doronilla to withdraw from Sterelas
savings account.1a\^/phi1.net

Petitioner also asserts that the Court of Appeals erred in affirming the trial courts decision since the findings of
fact therein were not accord with the evidence presented by petitioner during trial to prove that the transaction
between private respondent and Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla
to withdraw from Sterelas savings account.19

Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the actual
damages suffered by private respondent, and neither may it be held liable for moral and exemplary damages
as well as attorneys fees.20

Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a mutuum
but an accommodation,21 since he did not actually part with the ownership of his P200,000.00 and in fact asked
his wife to deposit said amount in the account of Sterela so that a certification can be issued to the effect that
Sterela had sufficient funds for purposes of its incorporation but at the same time, he retained some degree of
control over his money through his wife who was made a signatory to the savings account and in whose
possession the savings account passbook was given.22

He likewise asserts that the trial court did not err in finding that petitioner, Atienzas employer, is liable for the
return of his money. He insists that Atienza, petitioners assistant manager, connived with Doronilla in
defrauding private respondent since it was Atienza who facilitated the opening of Sterelas current account
three days after Mrs. Vives and Sanchez opened a savings account with petitioner for said company, as well
as the approval of the authority to debit Sterelas savings account to cover any overdrawings in its current
account.23

There is no merit in the petition.

At the outset, it must be emphasized that only questions of law may be raised in a petition for review filed with
this Court. The Court has repeatedly held that it is not its function to analyze and weigh all over again the
evidence presented by the parties during trial.24 The Courts jurisdiction is in principle limited to reviewing errors
of law that might have been committed by the Court of Appeals.25 Moreover, factual findings of courts, when
adopted and confirmed by the Court of Appeals, are final and conclusive on this Court unless these findings
are not supported by the evidence on record.26 There is no showing of any misapprehension of facts on the
part of the Court of Appeals in the case at bar that would require this Court to review and overturn the factual
findings of that court, especially since the conclusions of fact of the Court of Appeals and the trial court are not
only consistent but are also amply supported by the evidence on record.
No error was committed by the Court of Appeals when it ruled that the transaction between private respondent
and Doronilla was a commodatum and not a mutuum. A circumspect examination of the records reveals that
the transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the
two kinds of loans in this wise:

By the contract of loan, one of the parties delivers to another, either something not consumable so that the
latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or
money or other consumable thing, upon the condition that the same amount of the same kind and quality shall
be paid, in which case the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to
the borrower.

The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as
money, the contract would be a mutuum. However, there are some instances where a commodatum may have
for its object a consumable thing. Article 1936 of the Civil Code provides:

Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption
of the object, as when it is merely for exhibition.

Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to
lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the
loan is a commodatum and not a mutuum.

The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the
actual character of a contract.27 In case of doubt, the contemporaneous and subsequent acts of the parties
shall be considered in such determination.28

As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private
respondent agreed to deposit his money in the savings account of Sterela specifically for the purpose of
making it appear "that said firm had sufficient capitalization for incorporation, with the promise that the amount
shall be returned within thirty (30) days."29 Private respondent merely "accommodated" Doronilla by lending his
money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the
transaction that the money would not be removed from Sterelas savings account and would be returned to
private respondent after thirty (30) days.

Doronillas attempts to return to private respondent the amount of P200,000.00 which the latter deposited in
Sterelas account together with an additional P12,000.00, allegedly representing interest on the mutuum, did
not convert the transaction from a commodatum into a mutuum because such was not the intent of the parties
and because the additional P12,000.00 corresponds to the fruits of the lending of the P200,000.00. Article
1935 of the Civil Code expressly states that "[t]he bailee in commodatum acquires the use of the thing loaned
but not its fruits." Hence, it was only proper for Doronilla to remit to private respondent the interest accruing to
the latters money deposited with petitioner.

Neither does the Court agree with petitioners contention that it is not solidarily liable for the return of private
respondents money because it was not privy to the transaction between Doronilla and private respondent. The
nature of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of
petitioners liability for the return of private respondents money because the factual circumstances of the case
clearly show that petitioner, through its employee Mr. Atienza, was partly responsible for the loss of private
respondents money and is liable for its restitution.

Petitioners rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of Sterela for
Savings Account No. 10-1567 expressly states that
"2. Deposits and withdrawals must be made by the depositor personally or upon his written authority duly
authenticated, and neither a deposit nor a withdrawal will be permitted except upon the production of the
depositor savings bank book in which will be entered by the Bank the amount deposited or withdrawn."30

Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant Branch
Manager for the Buendia Branch of petitioner, to withdraw therefrom even without presenting the passbook
(which Atienza very well knew was in the possession of Mrs. Vives), not just once, but several times. Both the
Court of Appeals and the trial court found that Atienza allowed said withdrawals because he was party to
Doronillas "scheme" of defrauding private respondent:

But the scheme could not have been executed successfully without the knowledge, help and cooperation of
Rufo Atienza, assistant manager and cashier of the Makati (Buendia) branch of the defendant bank. Indeed,
the evidence indicates that Atienza had not only facilitated the commission of the fraud but he likewise helped
in devising the means by which it can be done in such manner as to make it appear that the transaction was in
accordance with banking procedure.

To begin with, the deposit was made in defendants Buendia branch precisely because Atienza was a key
officer therein. The records show that plaintiff had suggested that the P200,000.00 be deposited in his bank,
the Manila Banking Corporation, but Doronilla and Dumagpi insisted that it must be in defendants branch in
Makati for "it will be easier for them to get a certification". In fact before he was introduced to plaintiff, Doronilla
had already prepared a letter addressed to the Buendia branch manager authorizing Angeles B. Sanchez and
company to open a savings account for Sterela in the amount of P200,000.00, as "per coordination with Mr.
Rufo Atienza, Assistant Manager of the Bank x x x" (Exh. 1). This is a clear manifestation that the other
defendants had been in consultation with Atienza from the inception of the scheme. Significantly, there were
testimonies and admission that Atienza is the brother-in-law of a certain Romeo Mirasol, a friend and business
associate of Doronilla.1awphi1.nt

Then there is the matter of the ownership of the fund. Because of the "coordination" between Doronilla and
Atienza, the latter knew before hand that the money deposited did not belong to Doronilla nor to Sterela. Aside
from such foreknowledge, he was explicitly told by Inocencia Vives that the money belonged to her and her
husband and the deposit was merely to accommodate Doronilla. Atienza even declared that the money came
from Mrs. Vives.

Although the savings account was in the name of Sterela, the bank records disclose that the only ones
empowered to withdraw the same were Inocencia Vives and Angeles B. Sanchez. In the signature card
pertaining to this account (Exh. J), the authorized signatories were Inocencia Vives &/or Angeles B. Sanchez.
Atienza stated that it is the usual banking procedure that withdrawals of savings deposits could only be made
by persons whose authorized signatures are in the signature cards on file with the bank. He, however, said that
this procedure was not followed here because Sterela was owned by Doronilla. He explained that Doronilla
had the full authority to withdraw by virtue of such ownership. The Court is not inclined to agree with Atienza. In
the first place, he was all the time aware that the money came from Vives and did not belong to Sterela. He
was also told by Mrs. Vives that they were only accommodating Doronilla so that a certification can be issued
to the effect that Sterela had a deposit of so much amount to be sued in the incorporation of the firm. In the
second place, the signature of Doronilla was not authorized in so far as that account is concerned inasmuch as
he had not signed the signature card provided by the bank whenever a deposit is opened. In the third place,
neither Mrs. Vives nor Sanchez had given Doronilla the authority to withdraw.

Moreover, the transfer of fund was done without the passbook having been presented. It is an accepted
practice that whenever a withdrawal is made in a savings deposit, the bank requires the presentation of the
passbook. In this case, such recognized practice was dispensed with. The transfer from the savings account to
the current account was without the submission of the passbook which Atienza had given to Mrs. Vives.
Instead, it was made to appear in a certification signed by Estrella Dumagpi that a duplicate passbook was
issued to Sterela because the original passbook had been surrendered to the Makati branch in view of a loan
accommodation assigning the savings account (Exh. C). Atienza, who undoubtedly had a hand in the
execution of this certification, was aware that the contents of the same are not true. He knew that the passbook
was in the hands of Mrs. Vives for he was the one who gave it to her. Besides, as assistant manager of the
branch and the bank official servicing the savings and current accounts in question, he also was aware that the
original passbook was never surrendered. He was also cognizant that Estrella Dumagpi was not among those
authorized to withdraw so her certification had no effect whatsoever.
The circumstance surrounding the opening of the current account also demonstrate that Atienzas active
participation in the perpetration of the fraud and deception that caused the loss. The records indicate that this
account was opened three days later after the P200,000.00 was deposited. In spite of his disclaimer, the Court
believes that Atienza was mindful and posted regarding the opening of the current account considering that
Doronilla was all the while in "coordination" with him. That it was he who facilitated the approval of the authority
to debit the savings account to cover any overdrawings in the current account (Exh. 2) is not hard to
comprehend.

Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. x x x.31

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for damages caused
by their employees acting within the scope of their assigned tasks. To hold the employer liable under this
provision, it must be shown that an employer-employee relationship exists, and that the employee was acting
within the scope of his assigned task when the act complained of was committed.32 Case law in the United
States of America has it that a corporation that entrusts a general duty to its employee is responsible to the
injured party for damages flowing from the employees wrongful act done in the course of his general authority,
even though in doing such act, the employee may have failed in its duty to the employer and disobeyed the
latters instructions.33

There is no dispute that Atienza was an employee of petitioner. Furthermore, petitioner did not deny that
Atienza was acting within the scope of his authority as Assistant Branch Manager when he assisted Doronilla
in withdrawing funds from Sterelas Savings Account No. 10-1567, in which account private respondents
money was deposited, and in transferring the money withdrawn to Sterelas Current Account with petitioner.
Atienzas acts of helping Doronilla, a customer of the petitioner, were obviously done in furtherance of
petitioners interests34 even though in the process, Atienza violated some of petitioners rules such as those
stipulated in its savings account passbook.35 It was established that the transfer of funds from Sterelas savings
account to its current account could not have been accomplished by Doronilla without the invaluable
assistance of Atienza, and that it was their connivance which was the cause of private respondents loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil Code,
petitioner is liable for private respondents loss and is solidarily liable with Doronilla and Dumagpi for the return
of the P200,000.00 since it is clear that petitioner failed to prove that it exercised due diligence to prevent the
unauthorized withdrawals from Sterelas savings account, and that it was not negligent in the selection and
supervision of Atienza. Accordingly, no error was committed by the appellate court in the award of actual, moral
and exemplary damages, attorneys fees and costs of suit to private respondent.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals
are AFFIRMED.

DIGEST
Facts:
Vives (will be the creditor in this case) was asked by his friend Sanchez to help the latters friend, Doronilla
(will be the debtor in this case) in incorporating Doronillas business Strela. This help basically involved
Vives depositing a certain amount of money in Strelas bank account for purposes of incorporation
(rationale: Doronilla had to show that he had sufficient funds for incorporation). This amount shall later be
returned to Vives.
Relying on the assurances and representations of Sanchez and Doronilla, Vives issued a check of
P200,00 in favor of Strela and deposited the same into Strelas newly-opened bank account (the passbook
was given to the wife of Vives and the passbook had an instruction that no withdrawals/deposits will be
allowed unless the passbook is presented).
 Later on, Vives learned that Strela was no longer holding office in the address previously given to him. He
later found out that the funds had already been withdrawn leaving only a balance of P90,000. The Vives
spouses tried to withdraw the amount, but it was unable to since the balance had to answer for certain
postdated checks issued by Doronilla.
Doronilla made various tenders of check in favor of Vives in order to pay his debt. All of which were
dishonored.
Hence, Vives filed an action for recovery of sum against Doronilla, Sanchez, Dumagpi and Producers
Bank.
TC & CA: ruled in favor of Vives.

Issue/s:
(1) WON the transaction is a commodatum or a mutuum. COMMODATUM.
(2) WON the fact that there is an additional P 12,000 (allegedly representing interest) in the amount to be
returned to Vives converts the transaction from commodatum to mutuum. NO.
(3) WON Producers Bank is solidarily liable to Vives, considering that it was not privy to the transaction
between Vives and Doronilla. YES.

Held/Ratio:
(1) The transaction is a commodatum.
CC 1933 (the provision distinguishing between the two kinds of loans) seem to imply that if the subject of
the contract is a consummable thing, such as money, the contract would be a mutuum. However, there are
instances when a commodatum may have for its object a consummable thing. Such can be found in CC
1936 which states that consummable goods may be the subject of commodatum if the purpose of the
contract is not the consumption of the object, as when it is merely for exhibition. In this case, the intention
of the parties was merely for exhibition. Vives agreed to deposit his money in Strelas account specifically
for purpose of making it appear that Streal had sufficient capitalization for incorporation, with the promise
that the amount should be returned withing 30 days.
(2) CC 1935 states that the bailee in commodatum acquires the use of the thing loaned but not its fruits. In
this case, the additional P 12,000 corresponds to the fruits of the lending of the P 200,000.
(3) Atienza, the Branch Manager of Producers Bank, allowed the withdrawals on the account of Strela despite
the rule written in the passbook that neither a deposit, nor a withdrawal will be permitted except upon the
production of the passbook (recall in this case that the passbook was in the possession of the wife of Vives
all along). Hence, this only proves to show that Atienza allowed the withdrawals because he was party to
Doronillas scheme of defrauding Vives. By virtue of CC 2180, PNB, as employer, is held primarily and
solidarily liable for damages caused by their employees acting within the scope of their assigned tasks.
Atienzas acts, in helpong Doronilla, a customer of the bank, were obviously done in furtherance of the
business of the bank, even though in the process, Atienza violated some rules.

G.R. No. L-8321 October 14, 1913

ALEJANDRA MINA, ET AL., plaintiffs-appellants,

vs.
RUPERTA PASCUAL, ET AL., defendants-appellees.

ARELLANO, C.J.:

Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired during his lifetime, on
March 12, 1874, a lot in the center of the town of Laoag, the capital of the Province of Ilocos Norte, the
property having been awarded to him through its purchase at a public auction held by the alcalde mayor of that
province. The lot has a frontage of 120 meters and a depth of 15.

Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the said lot,
embracing 14 meters of its frontage by 11 meters of its depth.

Francisco Fontanilla, the former owner of the lot, being dead, the herein plaintiffs, Alejandro Mina, et al., were
recognized without discussion as his heirs.

Andres Fontanilla, the former owner of the warehouse, also having died, the children of Ruperta Pascual were
recognized likes without discussion, though it is not said how, and consequently are entitled to the said
building, or rather, as Ruperta Pascual herself stated, to only six-sevenths of one-half of it, the other half
belonging, as it appears, to the plaintiffs themselves, and the remaining one-seventh of the first one-half to the
children of one of the plaintiffs, Elena de Villanueva. The fact is that the plaintiffs and the defendants are
virtually, to all appearance, the owners of the warehouse; while the plaintiffs are undoubtedly, the owners of the
part of the lot occupied by that building, as well as of the remainder thereof.

This was the state of affairs, when, on May 6, 1909, Ruperta Pascual, as the guardian of her minor children,
the herein defendants, petitioned the Curt of First Instance of Ilocos Norte for authorization to sell "the six-
sevenths of the one-half of the warehouse, of 14 by 11 meters, together with its lot." The plaintiffs that is
Alejandra Mina, et al. opposed the petition of Ruperta Pascual for the reason that the latter had included
therein the lot occupied by the warehouse, which they claimed was their exclusive property. All this action was
taken in a special proceeding in re guardianship.

The plaintiffs did more than oppose Pascual's petition; they requested the court, through motion, to decide the
question of the ownership of the lot before it pass upon the petition for the sale of the warehouse. But the court
before determining the matter of the ownership of the lot occupied by the warehouse, ordered the sale of this
building, saying:

While the trial continues with respect to the ownership of the lot, the court orders the sale at public
auction of the said warehouse and of the lot on which it is built, with the present boundaries of the land
and condition of the building, at a price of not less than P2,890 Philippine currency . . . .

So, the warehouse, together with the lot on which it stands, was sold to Cu Joco, the other defendant in this
case, for the price mentioned.

The plaintiffs insisted upon a decision of the question of the ownership of the lot, and the court decided it by
holding that this land belonged to the owner of the warehouse which had been built thereon thirty years before.

The plaintiffs appealed and this court reversed the judgment of the lower court and held that the appellants
were the owners of the lot in question. 1

When the judgment became final and executory, a writ of execution issued and the plaintiffs were given
possession of the lot; but soon thereafter the trial court annulled this possession for the reason that it affected
Cu Joco, who had not been a party to the suit in which that writ was served.

It was then that the plaintiffs commenced the present action for the purpose of having the sale of the said lot
declared null and void and of no force and effect.

An agreement was had ad to the facts, the ninth paragraph of which is as follows:

9. That the herein plaintiffs excepted to the judgment and appealed therefrom to the Supreme Court
which found for them by holding that they are the owners of the lot in question, although there existed
and still exists a commodatum by virtue of which the guardianship (meaning the defendants) had and
has the use, and the plaintiffs the ownership, of the property, with no finding concerning the decree of
the lower court that ordered the sale.

The obvious purport of the cause "although there existed and still exists a commodatum," etc., appears to be
that it is a part of the decision of the Supreme Court and that, while finding the plaintiffs to be the owners of the
lot, we recognized in principle the existence of a commodatum under which the defendants held the lot.
Nothing could be more inexact. Possibly, also, the meaning of that clause is that, notwithstanding the finding
made by the Supreme Court that the plaintiffs were the owners, these former and the defendants agree that
there existed, and still exists, a commodatum, etc. But such an agreement would not affect the truth of the
contents of the decision of this court, and the opinions held by the litigants in regard to this point could have no
bearing whatever on the present decision.

Nor did the decree of the lower court that ordered the sale have the least influence in our previous decision to
require our making any finding in regard thereto, for, with or without that decree, the Supreme Court had to
decide the ownership of the lot consistently with its titles and not in accordance with the judicial acts or
proceedings had prior to the setting up of the issue in respect to the ownership of the property that was the
subject of the judicial decree.

What is essentially pertinent to the case is the fact that the defendant agree that the plaintiffs have the
ownership, and they themselves only the use, of the said lot.

On this premise, the nullity of the sale of the lot is in all respects quite evident, whatsoever be the manner in
which the sale was effected, whether judicially or extrajudicially.

He who has only the use of a thing cannot validly sell the thing itself. The effect of the sale being a transfer of
the ownership of the thing, it is evident that he who has only the mere use of the thing cannot transfer its
ownership. The sale of a thing effected by one who is not its owner is null and void. The defendants never were
the owners of the lot sold. The sale of it by them is necessarily null and void. On cannot convey to another
what he has never had himself.

The returns of the auction contain the following statements:

I, Ruperta Pascual, the guardian of the minors, etc., by virtue of the authorization conferred upon me on
the 31st of July, 1909, by the Court of First Instance of Ilocos Norte, proceeded with the sale at public
auction of the six-sevenths part of the one-half of the warehouse constructed of rubble stone, etc.

Whereas I, Ruperta Pascual, the guardian of the minors, etc., sold at public auction all the land and all
the rights title, interest, and ownership in the said property to Cu Joco, who was the highest bidder, etc.

Therefore, . . . I cede and deliver forever to the said purchaser, Cu Joco, his heirs and assigns, all the
interest, ownership and inheritance rights and others that, as the guardian of the said minors, I have
and may have in the said property, etc.

The purchaser could not acquire anything more than the interest that might be held by a person to whom realty
in possession of the vendor might be sold, for at a judicial auction nothing else is disposed of. What the minor
children of Ruperta Pascual had in their possession was the ownership of the six-sevenths part of one-half of
the warehouse and the use of the lot occupied by his building. This, and nothing more, could the Chinaman Cu
Joco acquire at that sale: not the ownership of the lot; neither the other half, nor the remaining one-seventh of
the said first half, of the warehouse. Consequently, the sale made to him of this one-seventh of one-half and
the entire other half of the building was null and void, and likewise with still more reason the sale of the lot the
building occupies.

The purchaser could and should have known what it was that was offered for sale and what it was that he
purchased. There is nothing that can justify the acquisition by the purchaser of the warehouse of the ownership
of the lot that this building occupies, since the minors represented by Ruperta Pascual never were the owners
of the said lot, nor were they ever considered to be such.

The trial court, in the judgment rendered, held that there were no grounds for the requested annulment of the
sale, and that the plaintiffs were entitled to the P600 deposited with the clerk of the court as the value of the lot
in question. The defendants, Ruperta Pascual and the Chinaman Cu Joco, were absolved from the complaint,
without express finding as to costs.

The plaintiffs cannot be obliged to acquiesce in or allow the sale made and be compelled to accept the price
set on the lot by expert appraisers, not even though the plaintiffs be considered as coowner of the warehouse.
It would be much indeed that, on the ground of coownership, they should have to abide by and tolerate the
sale of the said building, which point this court does not decide as it is not a question submitted to us for
decision, but, as regards the sale of the lot, it is in all respects impossible to hold that the plaintiffs must abide
by it and tolerate, it, and this conclusion is based on the fact that they did not give their consent (art. 1261, Civil
Code), and only the contracting parties who have given it are obliged to comply (art. 1091, idem).

The sole purpose of the action in the beginning was to obtain an annulment of the sale of the lot; but
subsequently the plaintiffs, through motion, asked for an amendment by their complaint in the sense that the
action should be deemed to be one for the recovery of possession of a lot and for the annulment of its sale.
The plaintiff's petition was opposed by the defendant's attorney, but was allowed by the court; therefore the
complaint seeks, after the judicial annulment of the sale of the lot, to have the defendants sentenced
immediately to deliver the same to the plaintiffs.

Such a finding appears to be in harmony with the decision rendered by the Supreme Court in previous suit,
wherein it was held that the ownership of the lot lay in the plaintiffs, and for this reason steps were taken to
give possession thereof to the defendants; but, as the purchaser Cu Joco was not a party to that suit, the
present action is strictly one for recover against Cu Joco to compel him, once the sale has been annulled, to
deliver the lot to its lawful owners, the plaintiffs.

As respects this action for recovery, this Supreme Court finds:

1. That it is a fact admitted by the litigating parties, both in this and in the previous suit, that Andres
Fontanilla, the defendants' predecessor in interest, erected the warehouse on the lot, some thirty years
ago, with the explicit consent of his brother Francisco Fontanilla, the plaintiff's predecessor in interest.

2. That it also appears to be an admitted fact that the plaintiffs and the defendants are the coowners of
the warehouse.

3. That it is a fact explicitly admitted in the agreement, that neither Andres Fontanilla nor his successors
paid any consideration or price whatever for the use of the lot occupied by the said building; whence it
is, perhaps, that both parties have denominated that use a commodatum.

Upon the premise of these facts, or even merely upon that of the first of them, the sentencing of the
defendants to deliver the lot to the plaintiffs does not follow as a necessary corollary of the judicial declaration
of ownership made in the previous suit, nor of that of the nullity of the sale of the lot, made in the present case.

The defendants do not hold lawful possession of the lot in question.1awphil.net

But, although both litigating parties may have agreed in their idea of the commodatum, on account of its not
being, as indeed it is not, a question of fact but of law, yet that denomination given by them to the use of the lot
granted by Francisco Fontanilla to his brother, Andres Fontanilla, is not acceptable. Contracts are not to be
interpreted in conformity with the name that the parties thereto agree to give them, but must be construed, duly
considering their constitutive elements, as they are defined and denominated by law.

By the contract of loan, one of the parties delivers to the other, either anything not perishable, in order
that the latter may use it during the certain period and return it to the former, in which case it is
called commodatum . . . (art. 1740, Civil Code).

It is, therefore, an essential feature of the commodatum that the use of the thing belonging to another shall for
a certain period. Francisco Fontanilla did not fix any definite period or time during which Andres Fontanilla
could have the use of the lot whereon the latter was to erect a stone warehouse of considerable value, and so
it is that for the past thirty years of the lot has been used by both Andres and his successors in interest. The
present contention of the plaintiffs that Cu Joco, now in possession of the lot, should pay rent for it at the rate
of P5 a month, would destroy the theory of the commodatum sustained by them, since, according to the
second paragraph of the aforecited article 1740, "commodatum is essentially gratuitous," and, if what the
plaintiffs themselves aver on page 7 of their brief is to be believed, it never entered Francisco's mind to limit the
period during which his brother Andres was to have the use of the lot, because he expected that the
warehouse would eventually fall into the hands of his son, Fructuoso Fontanilla, called the adopted son of
Andres, which did not come to pass for the reason that Fructuoso died before his uncle Andres. With that
expectation in view, it appears more likely that Francisco intended to allow his brother Andres a surface right;
but this right supposes the payment of an annual rent, and Andres had the gratuitous use of the lot.
Hence, as the facts aforestated only show that a building was erected on another's ground, the question
should be decided in accordance with the statutes that, thirty years ago, governed accessions to real estate,
and which were Laws 41 and 42, title 28, of the third Partida, nearly identical with the provisions of articles 361
and 362 of the Civil Code. So, then, pursuant to article 361, the owner of the land on which a building is
erected in good faith has a right to appropriate such edifice to himself, after payment of the indemnity
prescribed in articles 453 and 454, or to oblige the builder to pay him the value of the land. Such, and no other,
is the right to which the plaintiff are entitled.

For the foregoing reasons, it is only necessary to annul the sale of the said lot which was made by Ruperta
Pascual, in representation of her minor children, to Cu Joco, and to maintain the latter in the use of the lot until
the plaintiffs shall choose one or the other of the two rights granted them by article 361 of the Civil
Code.1awphil.net

The judgment appealed from is reversed and the sale of the lot in question is held to be null and void and of no
force or effect. No special finding is made as to the costs of both instances.

Digest
Mina vs Pascual

Facts: Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired duringhis lifetime, on March
12, 1874, a lot.Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the said
lot,embracing 14 meters of its frontage by 11 meters of its depth.Francisco Fontanilla, the former owner of the lot, being dead, the
herein plaintiffs, Alejandro Mina, et al.,were recognized without discussion as his heirs.Andres Fontanilla, the former owner of the
warehouse, also having died, the children of Ruperta Pascualwere recognized, though it is not said how, and consequently are
entitled to the said building, or rather, asRuperta Pascual herself stated, to only six-sevenths of one-half of it, the other half
belonging, as itappears, to the plaintiffs themselves, and the remaining one-seventh of the first one-half to the
children ofone of the plaintiffs, Elena de Villanueva. Ruperta Pascual, as the guardian of her minor children, the herein
defendants, petitioned the Curt ofFirst Instance of Ilocos Norte for authorization to sell "the six-sevenths of the
one-half of the warehouse,of 14 by 11 meters, together with its lot.The warehouse, together with the lot on which it stands, was
sold to Cu Joco, the other defendant inthis case

Issue: WoN there exist a contract of commodatum

Held: although both litigating parties may have agreed in their idea of the commodatum, on account of its not being, as
indeed it is not, a question of fact but of lawContracts are not to be interpreted in conformity with the name that the parties
thereto agree to givethem, but must be construed, duly considering their constitutive elements, as they are defined and
denominated by law.By the contract of loan, one of the parties delivers to the other, either anything not perishable, in orderthat the
latter may use it during the certain period and return it to the former, in which case it is called commodatum It is, therefore,
an essential feature of the commodatum that the use of the thing belonging to another shall BE for a
certain period. Francisco Fontanilla did not fix any definite period or time duringwhich Andres Fontanilla could have the use of
the lot whereon the latter was to erect a stonewarehouse of considerable value, and so it is that for the past thirty
years of the lot has been used byboth Andres and his successors in interest.
It would seem that the Supreme Court failed to consider the possibility of a contract of precardiumbetween
Francisco and Andres. Precardium is a kind of commodatum wherein the bailor may demandthe object at will if the
contract does not stipulate a period or use to which the thing is devoted
G.R. No. 146364 June 3, 2004

COLITO T. PAJUYO, petitioner,

vs.
COURT OF APPEALS and EDDIE GUEVARRA, respondents.

CARPIO, J.:

The Case

Before us is a petition for review1 of the 21 June 2000 Decision2 and 14 December 2000 Resolution of the
Court of Appeals in CA-G.R. SP No. 43129. The Court of Appeals set aside the 11 November 1996 decision3 of
the Regional Trial Court of Quezon City, Branch 81,4 affirming the 15 December 1995 decision5 of the
Metropolitan Trial Court of Quezon City, Branch 31.6

The Antecedents

In June 1979, petitioner Colito T. Pajuyo ("Pajuyo") paid P400 to a certain Pedro Perez for the rights over a
250-square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a house made of light materials
on the lot. Pajuyo and his family lived in the house from 1979 to 7 December 1985.

On 8 December 1985, Pajuyo and private respondent Eddie Guevarra ("Guevarra") executed a Kasunduan or
agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra
would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily
vacate the premises on Pajuyos demand.

In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate
the house. Guevarra refused.

Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon City, Branch 31
("MTC").

In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the
house stands because the lot is within the 150 hectares set aside by Proclamation No. 137 for socialized
housing. Guevarra pointed out that from December 1985 to September 1994, Pajuyo did not show up or
communicate with him. Guevarra insisted that neither he nor Pajuyo has valid title to the lot.

On 15 December 1995, the MTC rendered its decision in favor of Pajuyo. The dispositive portion of the MTC
decision reads:

WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and against
defendant, ordering the latter to:

A) vacate the house and lot occupied by the defendant or any other person or persons claiming
any right under him;

B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00) monthly as reasonable
compensation for the use of the premises starting from the last demand;
 C) pay plaintiff the sum of P3,000.00 as and by way of attorneys fees; and

D) pay the cost of suit.

SO ORDERED.7

Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon City, Branch 81 ("RTC").

On 11 November 1996, the RTC affirmed the MTC decision. The dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, the Court finds no reversible error in the decision appealed from,
being in accord with the law and evidence presented, and the same is hereby affirmed en toto.

SO ORDERED.8

Guevarra received the RTC decision on 29 November 1996. Guevarra had only until 14 December 1996 to file
his appeal with the Court of Appeals. Instead of filing his appeal with the Court of Appeals, Guevarra filed with
the Supreme Court a "Motion for Extension of Time to File Appeal by Certiorari Based on Rule 42" ("motion for
extension"). Guevarra theorized that his appeal raised pure questions of law. The Receiving Clerk of the
Supreme Court received the motion for extension on 13 December 1996 or one day before the right to appeal
expired.

On 3 January 1997, Guevarra filed his petition for review with the Supreme Court.

On 8 January 1997, the First Division of the Supreme Court issued a Resolution9 referring the motion for
extension to the Court of Appeals which has concurrent jurisdiction over the case. The case presented no
special and important matter for the Supreme Court to take cognizance of at the first instance.

On 28 January 1997, the Thirteenth Division of the Court of Appeals issued a Resolution10 granting the motion
for extension conditioned on the timeliness of the filing of the motion.

On 27 February 1997, the Court of Appeals ordered Pajuyo to comment on Guevaras petition for review. On
11 April 1997, Pajuyo filed his Comment.

On 21 June 2000, the Court of Appeals issued its decision reversing the RTC decision. The dispositive portion
of the decision reads:

WHEREFORE, premises considered, the assailed Decision of the court a quo in Civil Case No. Q-96-
26943 is REVERSED and SET ASIDE; and it is hereby declared that the ejectment case filed against
defendant-appellant is without factual and legal basis.

SO ORDERED.11

Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that the Court of Appeals should
have dismissed outright Guevarras petition for review because it was filed out of time. Moreover, it was
Guevarras counsel and not Guevarra who signed the certification against forum-shopping.

On 14 December 2000, the Court of Appeals issued a resolution denying Pajuyos motion for reconsideration.
The dispositive portion of the resolution reads:

WHEREFORE, for lack of merit, the motion for reconsideration is hereby DENIED. No costs.

SO ORDERED.12

The Ruling of the MTC

The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot.
Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Thus,
Guevarras refusal to vacate the house on Pajuyos demand made Guevarras continued possession of the
house illegal.
 The Ruling of the RTC

The RTC upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and
Guevarra. The terms of the Kasunduan bound Guevarra to return possession of the house on demand.

The RTC rejected Guevarras claim of a better right under Proclamation No. 137, the Revised National
Government Center Housing Project Code of Policies and other pertinent laws. In an ejectment suit, the RTC
has no power to decide Guevarras rights under these laws. The RTC declared that in an ejectment case, the
only issue for resolution is material or physical possession, not ownership.

The Ruling of the Court of Appeals

The Court of Appeals declared that Pajuyo and Guevarra are squatters. Pajuyo and Guevarra illegally
occupied the contested lot which the government owned.

Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no right or title over
the lot because it is public land. The assignment of rights between Perez and Pajuyo, and
the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo and Guevarra are in pari
delicto or in equal fault. The court will leave them where they are.

The Court of Appeals reversed the MTC and RTC rulings, which held that the Kasunduan between Pajuyo and
Guevarra created a legal tie akin to that of a landlord and tenant relationship. The Court of Appeals ruled that
the Kasunduan is not a lease contract but a commodatum because the agreement is not for a price certain.

Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate court held that
Guevarra has a better right over the property under Proclamation No. 137. President Corazon C. Aquino
("President Aquino") issued Proclamation No. 137 on 7 September 1987. At that time, Guevarra was in
physical possession of the property. Under Article VI of the Code of Policies Beneficiary Selection and
Disposition of Homelots and Structures in the National Housing Project ("the Code"), the actual occupant or
caretaker of the lot shall have first priority as beneficiary of the project. The Court of Appeals concluded that
Guevarra is first in the hierarchy of priority.

In denying Pajuyos motion for reconsideration, the appellate court debunked Pajuyos claim that Guevarra
filed his motion for extension beyond the period to appeal.

The Court of Appeals pointed out that Guevarras motion for extension filed before the Supreme Court was
stamped "13 December 1996 at 4:09 PM" by the Supreme Courts Receiving Clerk. The Court of Appeals
concluded that the motion for extension bore a date, contrary to Pajuyos claim that the motion for extension
was undated. Guevarra filed the motion for extension on time on 13 December 1996 since he filed the motion
one day before the expiration of the reglementary period on 14 December 1996. Thus, the motion for extension
properly complied with the condition imposed by the Court of Appeals in its 28 January 1997 Resolution. The
Court of Appeals explained that the thirty-day extension to file the petition for review was deemed granted
because of such compliance.

The Court of Appeals rejected Pajuyos argument that the appellate court should have dismissed the petition
for review because it was Guevarras counsel and not Guevarra who signed the certification against forum-
shopping. The Court of Appeals pointed out that Pajuyo did not raise this issue in his Comment. The Court of
Appeals held that Pajuyo could not now seek the dismissal of the case after he had extensively argued on the
merits of the case. This technicality, the appellate court opined, was clearly an afterthought.

The Issues

Pajuyo raises the following issues for resolution:

WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND DISCRETION
TANTAMOUNT TO LACK OF JURISDICTION:

1) in GRANTING, instead of denying, Private Respondents Motion for an Extension of thirty

days to file petition for review at the time when there was no more period to extend as the
decision of the Regional Trial Court had already become final and executory.
 2) in giving due course, instead of dismissing, private respondents Petition for Review even
though the certification against forum-shopping was signed only by counsel instead of by
petitioner himself.

3) in ruling that the Kasunduan voluntarily entered into by the parties was in fact
a commodatum, instead of a Contract of Lease as found by the Metropolitan Trial Court and in
holding that "the ejectment case filed against defendant-appellant is without legal and factual
basis".

4) in reversing and setting aside the Decision of the Regional Trial Court in Civil Case No. Q-96-
26943 and in holding that the parties are in pari delicto being both squatters, therefore, illegal
occupants of the contested parcel of land.

5) in deciding the unlawful detainer case based on the so-called Code of Policies of the National
Government Center Housing Project instead of deciding the same under
the Kasunduan voluntarily executed by the parties, the terms and conditions of which are the
laws between themselves.13

The Ruling of the Court

The procedural issues Pajuyo is raising are baseless. However, we find merit in the substantive issues Pajuyo
is submitting for resolution.

Procedural Issues

Pajuyo insists that the Court of Appeals should have dismissed outright Guevarras petition for review because
the RTC decision had already become final and executory when the appellate court acted on Guevarras
motion for extension to file the petition. Pajuyo points out that Guevarra had only one day before the expiry of
his period to appeal the RTC decision. Instead of filing the petition for review with the Court of Appeals,
Guevarra filed with this Court an undated motion for extension of 30 days to file a petition for review. This Court
merely referred the motion to the Court of Appeals. Pajuyo believes that the filing of the motion for extension
with this Court did not toll the running of the period to perfect the appeal. Hence, when the Court of Appeals
received the motion, the period to appeal had already expired.

We are not persuaded.

Decisions of the regional trial courts in the exercise of their appellate jurisdiction are appealable to the Court of
Appeals by petition for review in cases involving questions of fact or mixed questions of fact and
law.14 Decisions of the regional trial courts involving pure questions of law are appealable directly to this Court
by petition for review.15 These modes of appeal are now embodied in Section 2, Rule 41 of the 1997 Rules of
Civil Procedure.

Guevarra believed that his appeal of the RTC decision involved only questions of law. Guevarra thus filed his
motion for extension to file petition for review before this Court on 14 December 1996. On 3 January 1997,
Guevarra then filed his petition for review with this Court. A perusal of Guevarras petition for review gives the
impression that the issues he raised were pure questions of law. There is a question of law when the doubt or
difference is on what the law is on a certain state of facts.16 There is a question of fact when the doubt or
difference is on the truth or falsity of the facts alleged.17

In his petition for review before this Court, Guevarra no longer disputed the facts. Guevarras petition for review
raised these questions: (1) Do ejectment cases pertain only to possession of a structure, and not the lot on
which the structure stands? (2) Does a suit by a squatter against a fellow squatter constitute a valid case for
ejectment? (3) Should a Presidential Proclamation governing the lot on which a squatters structure stands be
considered in an ejectment suit filed by the owner of the structure?

These questions call for the evaluation of the rights of the parties under the law on ejectment and the
Presidential Proclamation. At first glance, the questions Guevarra raised appeared purely legal. However,
some factual questions still have to be resolved because they have a bearing on the legal questions raised in
the petition for review. These factual matters refer to the metes and bounds of the disputed property and the
application of Guevarra as beneficiary of Proclamation No. 137.
The Court of Appeals has the power to grant an extension of time to file a petition for review. In Lacsamana v.
Second Special Cases Division of the Intermediate Appellate Court,18 we declared that the Court of
Appeals could grant extension of time in appeals by petition for review. In Liboro v. Court of Appeals,19 we
clarified that the prohibition against granting an extension of time applies only in a case where ordinary appeal
is perfected by a mere notice of appeal. The prohibition does not apply in a petition for review where the
pleading needs verification. A petition for review, unlike an ordinary appeal, requires preparation and research
to present a persuasive position.20 The drafting of the petition for review entails more time and effort than filing
a notice of appeal.21 Hence, the Court of Appeals may allow an extension of time to file a petition for review.

In the more recent case of Commissioner of Internal Revenue v. Court of Appeals,22 we held
that Liboros clarification of Lacsamana is consistent with the Revised Internal Rules of the Court of Appeals
and Supreme Court Circular No. 1-91. They all allow an extension of time for filing petitions for review with the
Court of Appeals. The extension, however, should be limited to only fifteen days save in exceptionally
meritorious cases where the Court of Appeals may grant a longer period.

A judgment becomes "final and executory" by operation of law. Finality of judgment becomes a fact on the
lapse of the reglementary period to appeal if no appeal is perfected.23 The RTC decision could not have gained
finality because the Court of Appeals granted the 30-day extension to Guevarra.

The Court of Appeals did not commit grave abuse of discretion when it approved Guevarras motion for
extension. The Court of Appeals gave due course to the motion for extension because it complied with the
condition set by the appellate court in its resolution dated 28 January 1997. The resolution stated that the
Court of Appeals would only give due course to the motion for extension if filed on time. The motion for
extension met this condition.

The material dates to consider in determining the timeliness of the filing of the motion for extension are (1) the
date of receipt of the judgment or final order or resolution subject of the petition, and (2) the date of filing of the
motion for extension.24 It is the date of the filing of the motion or pleading, and not the date of execution, that
determines the timeliness of the filing of that motion or pleading. Thus, even if the motion for extension bears
no date, the date of filing stamped on it is the reckoning point for determining the timeliness of its filing.

Guevarra had until 14 December 1996 to file an appeal from the RTC decision. Guevarra filed his motion for
extension before this Court on 13 December 1996, the date stamped by this Courts Receiving Clerk on the
motion for extension. Clearly, Guevarra filed the motion for extension exactly one day before the lapse of the
reglementary period to appeal.

Assuming that the Court of Appeals should have dismissed Guevarras appeal on technical grounds, Pajuyo
did not ask the appellate court to deny the motion for extension and dismiss the petition for review at the
earliest opportunity. Instead, Pajuyo vigorously discussed the merits of the case. It was only when the Court of
Appeals ruled in Guevarras favor that Pajuyo raised the procedural issues against Guevarras petition for
review.

A party who, after voluntarily submitting a dispute for resolution, receives an adverse decision on the merits, is
estopped from attacking the jurisdiction of the court.25 Estoppel sets in not because the judgment of the court is
a valid and conclusive adjudication, but because the practice of attacking the courts jurisdiction after
voluntarily submitting to it is against public policy.26

In his Comment before the Court of Appeals, Pajuyo also failed to discuss Guevarras failure to sign the
certification against forum shopping. Instead, Pajuyo harped on Guevarras counsel signing the verification,
claiming that the counsels verification is insufficient since it is based only on "mere information."

A partys failure to sign the certification against forum shopping is different from the partys failure to sign
personally the verification. The certificate of non-forum shopping must be signed by the party, and not by
counsel.27 The certification of counsel renders the petition defective.28

On the other hand, the requirement on verification of a pleading is a formal and not a jurisdictional requisite.29 It
is intended simply to secure an assurance that what are alleged in the pleading are true and correct and not
the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.30 The party
need not sign the verification. A partys representative, lawyer or any person who personally knows the truth of
the facts alleged in the pleading may sign the verification.31
We agree with the Court of Appeals that the issue on the certificate against forum shopping was merely an
afterthought. Pajuyo did not call the Court of Appeals attention to this defect at the early stage of the
proceedings. Pajuyo raised this procedural issue too late in the proceedings.

Absence of Title over the Disputed Property will not Divest the Courts of Jurisdiction to Resolve the
Issue of Possession

Settled is the rule that the defendants claim of ownership of the disputed property will not divest the inferior
court of its jurisdiction over the ejectment case.32 Even if the pleadings raise the issue of ownership, the court
may pass on such issue to determine only the question of possession, especially if the ownership is
inseparably linked with the possession.33 The adjudication on the issue of ownership is only provisional and will
not bar an action between the same parties involving title to the land.34 This doctrine is a necessary
consequence of the nature of the two summary actions of ejectment, forcible entry and unlawful detainer,
where the only issue for adjudication is the physical or material possession over the real property.35

In this case, what Guevarra raised before the courts was that he and Pajuyo are not the owners of the
contested property and that they are mere squatters. Will the defense that the parties to the ejectment case are
not the owners of the disputed lot allow the courts to renounce their jurisdiction over the case? The Court of
Appeals believed so and held that it would just leave the parties where they are since they are in pari delicto.

We do not agree with the Court of Appeals.

Ownership or the right to possess arising from ownership is not at issue in an action for recovery of
possession. The parties cannot present evidence to prove ownership or right to legal possession except to
prove the nature of the possession when necessary to resolve the issue of physical possession.36 The same is
true when the defendant asserts the absence of title over the property. The absence of title over the contested
lot is not a ground for the courts to withhold relief from the parties in an ejectment case.

The only question that the courts must resolve in ejectment proceedings is - who is entitled to the physical
possession of the premises, that is, to the possession de facto and not to the possession de jure.37 It does not
even matter if a partys title to the property is questionable,38 or when both parties intruded into public land and
their applications to own the land have yet to be approved by the proper government agency.39 Regardless of
the actual condition of the title to the property, the party in peaceable quiet possession shall not be thrown out
by a strong hand, violence or terror.40 Neither is the unlawful withholding of property allowed. Courts will always
uphold respect for prior possession.

Thus, a party who can prove prior possession can recover such possession even against the owner
himself.41Whatever may be the character of his possession, if he has in his favor prior possession in time, he
has the security that entitles him to remain on the property until a person with a better right lawfully ejects
him.42 To repeat, the only issue that the court has to settle in an ejectment suit is the right to physical
possession.

In Pitargue v. Sorilla,43 the government owned the land in dispute. The government did not authorize either
the plaintiff or the defendant in the case of forcible entry case to occupy the land. The plaintiff had prior
possession and had already introduced improvements on the public land. The plaintiff had a pending
application for the land with the Bureau of Lands when the defendant ousted him from possession. The plaintiff
filed the action of forcible entry against the defendant. The government was not a party in the case of forcible
entry.

The defendant questioned the jurisdiction of the courts to settle the issue of possession because while the
application of the plaintiff was still pending, title remained with the government, and the Bureau of Public Lands
had jurisdiction over the case. We disagreed with the defendant. We ruled that courts have jurisdiction to
entertain ejectment suits even before the resolution of the application. The plaintiff, by priority of his application
and of his entry, acquired prior physical possession over the public land applied for as against other private
claimants. That prior physical possession enjoys legal protection against other private claimants because only
a court can take away such physical possession in an ejectment case.

While the Court did not brand the plaintiff and the defendant in Pitargue44 as squatters, strictly speaking, their
entry into the disputed land was illegal. Both the plaintiff and defendant entered the public land without the
owners permission. Title to the land remained with the government because it had not awarded to anyone
ownership of the contested public land. Both the plaintiff and the defendant were in effect squatting on
government property. Yet, we upheld the courts jurisdiction to resolve the issue of possession even if the
plaintiff and the defendant in the ejectment case did not have any title over the contested land.

Courts must not abdicate their jurisdiction to resolve the issue of physical possession because of the public
need to preserve the basic policy behind the summary actions of forcible entry and unlawful detainer. The
underlying philosophy behind ejectment suits is to prevent breach of the peace and criminal disorder and to
compel the party out of possession to respect and resort to the law alone to obtain what he claims is his.45 The
party deprived of possession must not take the law into his own hands.46 Ejectment proceedings are summary
in nature so the authorities can settle speedily actions to recover possession because of the overriding need to
quell social disturbances.47

We further explained in Pitargue the greater interest that is at stake in actions for recovery of possession. We
made the following pronouncements in Pitargue:

The question that is before this Court is: Are courts without jurisdiction to take cognizance of
possessory actions involving these public lands before final award is made by the Lands Department,
and before title is given any of the conflicting claimants? It is one of utmost importance, as there are
public lands everywhere and there are thousands of settlers, especially in newly opened regions. It also
involves a matter of policy, as it requires the determination of the respective authorities and functions of
two coordinate branches of the Government in connection with public land conflicts.

Our problem is made simple by the fact that under the Civil Code, either in the old, which was in force
in this country before the American occupation, or in the new, we have a possessory action, the aim
and purpose of which is the recovery of the physical possession of real property, irrespective of the
question as to who has the title thereto. Under the Spanish Civil Code we had the accion interdictal, a
summary proceeding which could be brought within one year from dispossession (Roman Catholic
Bishop of Cebu vs. Mangaron, 6 Phil. 286, 291); and as early as October 1, 1901, upon the enactment
of the Code of Civil Procedure (Act No. 190 of the Philippine Commission) we implanted the common
law action of forcible entry (section 80 of Act No. 190), the object of which has been stated by this Court
to be "to prevent breaches of the peace and criminal disorder which would ensue from the
withdrawal of the remedy, and the reasonable hope such withdrawal would create that some
advantage must accrue to those persons who, believing themselves entitled to the possession
of property, resort to force to gain possession rather than to some appropriate action in the
court to assert their claims." (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) So
before the enactment of the first Public Land Act (Act No. 926) the action of forcible entry was already
available in the courts of the country. So the question to be resolved is, Did the Legislature intend,
when it vested the power and authority to alienate and dispose of the public lands in the Lands
Department, to exclude the courts from entertaining the possessory action of forcible entry between
rival claimants or occupants of any land before award thereof to any of the parties? Did Congress
intend that the lands applied for, or all public lands for that matter, be removed from the jurisdiction of
the judicial Branch of the Government, so that any troubles arising therefrom, or any breaches of the
peace or disorders caused by rival claimants, could be inquired into only by the Lands Department to
the exclusion of the courts? The answer to this question seems to us evident. The Lands Department
does not have the means to police public lands; neither does it have the means to prevent disorders
arising therefrom, or contain breaches of the peace among settlers; or to pass promptly upon conflicts
of possession. Then its power is clearly limited to disposition and alienation, and while it may
decide conflicts of possession in order to make proper award, the settlement of conflicts of
possession which is recognized in the court herein has another ultimate purpose, i.e., the
protection of actual possessors and occupants with a view to the prevention of breaches of the
peace. The power to dispose and alienate could not have been intended to include the power to
prevent or settle disorders or breaches of the peace among rival settlers or claimants prior to
the final award. As to this, therefore, the corresponding branches of the Government must continue to
exercise power and jurisdiction within the limits of their respective functions. The vesting of the Lands
Department with authority to administer, dispose, and alienate public lands, therefore, must not
be understood as depriving the other branches of the Government of the exercise of the
respective functions or powers thereon, such as the authority to stop disorders and quell
breaches of the peace by the police, the authority on the part of the courts to take jurisdiction
 over possessory actions arising therefrom not involving, directly or indirectly, alienation and
disposition.

Our attention has been called to a principle enunciated in American courts to the effect that courts have
no jurisdiction to determine the rights of claimants to public lands, and that until the disposition of the
land has passed from the control of the Federal Government, the courts will not interfere with the
administration of matters concerning the same. (50 C. J. 1093-1094.) We have no quarrel with this
principle. The determination of the respective rights of rival claimants to public lands is different from
the determination of who has the actual physical possession or occupation with a view to protecting the
same and preventing disorder and breaches of the peace. A judgment of the court ordering restitution of
the possession of a parcel of land to the actual occupant, who has been deprived thereof by another
through the use of force or in any other illegal manner, can never be "prejudicial interference" with the
disposition or alienation of public lands. On the other hand, if courts were deprived of jurisdiction
of cases involving conflicts of possession, that threat of judicial action against breaches of the
peace committed on public lands would be eliminated, and a state of lawlessness would
probably be produced between applicants, occupants or squatters, where force or might, not
right or justice, would rule.

It must be borne in mind that the action that would be used to solve conflicts of possession between
rivals or conflicting applicants or claimants would be no other than that of forcible entry. This action,
both in England and the United States and in our jurisdiction, is a summary and expeditious remedy
whereby one in peaceful and quiet possession may recover the possession of which he has been
deprived by a stronger hand, by violence or terror; its ultimate object being to prevent breach of the
peace and criminal disorder. (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) The basis
of the remedy is mere possession as a fact, of physical possession, not a legal possession. (Mediran
vs. Villanueva, 37 Phil. 752.) The title or right to possession is never in issue in an action of forcible
entry; as a matter of fact, evidence thereof is expressly banned, except to prove the nature of the
possession. (Second 4, Rule 72, Rules of Court.) With this nature of the action in mind, by no stretch of
the imagination can conclusion be arrived at that the use of the remedy in the courts of justice would
constitute an interference with the alienation, disposition, and control of public lands. To limit ourselves
to the case at bar can it be pretended at all that its result would in any way interfere with the manner of
the alienation or disposition of the land contested? On the contrary, it would facilitate adjudication, for
the question of priority of possession having been decided in a final manner by the courts, said
question need no longer waste the time of the land officers making the adjudication or award.
(Emphasis ours)

The Principle of Pari Delicto is not Applicable to Ejectment Cases

The Court of Appeals erroneously applied the principle of pari delicto to this case.

Articles 1411 and 1412 of the Civil Code48 embody the principle of pari delicto. We explained the principle of
pari delicto in these words:

The rule of pari delicto is expressed in the maxims ex dolo malo non eritur actio and in pari delicto
potior est conditio defedentis. The law will not aid either party to an illegal agreement. It leaves the
parties where it finds them.49

The application of the pari delicto principle is not absolute, as there are exceptions to its application. One of
these exceptions is where the application of the pari delicto rule would violate well-established public policy.50

In Drilon v. Gaurana,51 we reiterated the basic policy behind the summary actions of forcible entry and
unlawful detainer. We held that:

It must be stated that the purpose of an action of forcible entry and detainer is that, regardless of the
actual condition of the title to the property, the party in peaceable quiet possession shall not be turned
out by strong hand, violence or terror. In affording this remedy of restitution the object of the statute is to
prevent breaches of the peace and criminal disorder which would ensue from the withdrawal of the
remedy, and the reasonable hope such withdrawal would create that some advantage must accrue to
those persons who, believing themselves entitled to the possession of property, resort to force to gain
possession rather than to some appropriate action in the courts to assert their claims. This is the
 philosophy at the foundation of all these actions of forcible entry and detainer which are designed to
compel the party out of possession to respect and resort to the law alone to obtain what he claims is
his.52

Clearly, the application of the principle of pari delicto to a case of ejectment between squatters is fraught with
danger. To shut out relief to squatters on the ground of pari delicto would openly invite mayhem and
lawlessness. A squatter would oust another squatter from possession of the lot that the latter had illegally
occupied, emboldened by the knowledge that the courts would leave them where they are. Nothing would then
stand in the way of the ousted squatter from re-claiming his prior possession at all cost.

Petty warfare over possession of properties is precisely what ejectment cases or actions for recovery of
possession seek to prevent.53 Even the owner who has title over the disputed property cannot take the law into
his own hands to regain possession of his property. The owner must go to court.

Courts must resolve the issue of possession even if the parties to the ejectment suit are squatters. The
determination of priority and superiority of possession is a serious and urgent matter that cannot be left to the
squatters to decide. To do so would make squatters receive better treatment under the law. The law restrains
property owners from taking the law into their own hands. However, the principle of pari delicto as applied by
the Court of Appeals would give squatters free rein to dispossess fellow squatters or violently retake
possession of properties usurped from them. Courts should not leave squatters to their own devices in cases
involving recovery of possession.

Possession is the only Issue for Resolution in an Ejectment Case

The case for review before the Court of Appeals was a simple case of ejectment. The Court of Appeals refused
to rule on the issue of physical possession. Nevertheless, the appellate court held that the pivotal issue in this
case is who between Pajuyo and Guevarra has the "priority right as beneficiary of the contested land under
Proclamation No. 137."54 According to the Court of Appeals, Guevarra enjoys preferential right under
Proclamation No. 137 because Article VI of the Code declares that the actual occupant or caretaker is the one
qualified to apply for socialized housing.

The ruling of the Court of Appeals has no factual and legal basis.

First. Guevarra did not present evidence to show that the contested lot is part of a relocation site under
Proclamation No. 137. Proclamation No. 137 laid down the metes and bounds of the land that it declared open
for disposition to bona fide residents.

The records do not show that the contested lot is within the land specified by Proclamation No. 137. Guevarra
had the burden to prove that the disputed lot is within the coverage of Proclamation No. 137. He failed to do
so.

Second. The Court of Appeals should not have given credence to Guevarras unsubstantiated claim that he is
the beneficiary of Proclamation No. 137. Guevarra merely alleged that in the survey the project administrator
conducted, he and not Pajuyo appeared as the actual occupant of the lot.

There is no proof that Guevarra actually availed of the benefits of Proclamation No. 137. Pajuyo allowed
Guevarra to occupy the disputed property in 1985. President Aquino signed Proclamation No. 137 into law on
11 March 1986. Pajuyo made his earliest demand for Guevarra to vacate the property in September 1994.

During the time that Guevarra temporarily held the property up to the time that Proclamation No. 137 allegedly
segregated the disputed lot, Guevarra never applied as beneficiary of Proclamation No. 137. Even when
Guevarra already knew that Pajuyo was reclaiming possession of the property, Guevarra did not take any step
to comply with the requirements of Proclamation No. 137.

Third. Even assuming that the disputed lot is within the coverage of Proclamation No. 137 and Guevarra has a
pending application over the lot, courts should still assume jurisdiction and resolve the issue of possession.
However, the jurisdiction of the courts would be limited to the issue of physical possession only.

In Pitargue,55 we ruled that courts have jurisdiction over possessory actions involving public land to determine
the issue of physical possession. The determination of the respective rights of rival claimants to public land is,
however, distinct from the determination of who has the actual physical possession or who has a better right of
physical possession.56 The administrative disposition and alienation of public lands should be threshed out in
the proper government agency.57

The Court of Appeals determination of Pajuyo and Guevarras rights under Proclamation No. 137 was
premature. Pajuyo and Guevarra were at most merely potential beneficiaries of the law. Courts should not
preempt the decision of the administrative agency mandated by law to determine the qualifications of
applicants for the acquisition of public lands. Instead, courts should expeditiously resolve the issue of physical
possession in ejectment cases to prevent disorder and breaches of peace.58

Pajuyo is Entitled to Physical Possession of the Disputed Property

Guevarra does not dispute Pajuyos prior possession of the lot and ownership of the house built on it. Guevarra
expressly admitted the existence and due execution of the Kasunduan. The Kasunduan reads:

Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay nagbibigay pahintulot
kay G. Eddie Guevarra, na pansamantalang manirahan sa nasabing bahay at lote ng "walang bayad."
Kaugnay nito, kailangang panatilihin nila ang kalinisan at kaayusan ng bahay at lote.

Sa sandaling kailangan na namin ang bahay at lote, silay kusang aalis ng walang reklamo.

Based on the Kasunduan, Pajuyo permitted Guevarra to reside in the house and lot free of rent, but Guevarra
was under obligation to maintain the premises in good condition. Guevarra promised to vacate the premises on
Pajuyos demand but Guevarra broke his promise and refused to heed Pajuyos demand to vacate.

These facts make out a case for unlawful detainer. Unlawful detainer involves the withholding by a person from
another of the possession of real property to which the latter is entitled after the expiration or termination of the
formers right to hold possession under a contract, express or implied.59

Where the plaintiff allows the defendant to use his property by tolerance without any contract, the defendant is
necessarily bound by an implied promise that he will vacate on demand, failing which, an action for unlawful
detainer will lie.60 The defendants refusal to comply with the demand makes his continued possession of the
property unlawful.61 The status of the defendant in such a case is similar to that of a lessee or tenant whose
term of lease has expired but whose occupancy continues by tolerance of the owner.62

This principle should apply with greater force in cases where a contract embodies the permission or tolerance
to use the property. The Kasunduan expressly articulated Pajuyos forbearance. Pajuyo did not require
Guevarra to pay any rent but only to maintain the house and lot in good condition. Guevarra expressly vowed
in the Kasunduan that he would vacate the property on demand. Guevarras refusal to comply with Pajuyos
demand to vacate made Guevarras continued possession of the property unlawful.

We do not subscribe to the Court of Appeals theory that the Kasunduan is one of commodatum.

In a contract of commodatum, one of the parties delivers to another something not consumable so that the
latter may use the same for a certain time and return it.63 An essential feature of commodatum is that it is
gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain
period.64 Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period
stipulated, or after accomplishment of the use for which the commodatum is constituted.65 If the bailor should
have urgent need of the thing, he may demand its return for temporary use.66 If the use of the thing is merely
tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is
called a precarium.67 Under the Civil Code, precarium is a kind of commodatum.68

The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially
gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property
in good condition. The imposition of this obligation makes the Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are also different from that of a commodatum. Case law on
ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant relationship
where the withdrawal of permission would result in the termination of the lease.69 The tenants withholding of
the property would then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee
would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation to deliver
or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration
and commodatum.70 These contracts certainly involve the obligation to deliver or return the thing received.71

Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter.
Squatters, Guevarra pointed out, cannot enter into a contract involving the land they illegally occupy. Guevarra
insists that the contract is void.

Guevarra should know that there must be honor even between squatters. Guevarra freely entered into
the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it.
The Kasunduan binds Guevarra.

The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to
physical possession of the contested property. The Kasunduan is the undeniable evidence of Guevarras
recognition of Pajuyos better right of physical possession. Guevarra is clearly a possessor in bad faith. The
absence of a contract would not yield a different result, as there would still be an implied promise to vacate.

Guevarra contends that there is "a pernicious evil that is sought to be avoided, and that is allowing an
absentee squatter who (sic) makes (sic) a profit out of his illegal act."72 Guevarra bases his argument on the
preferential right given to the actual occupant or caretaker under Proclamation No. 137 on socialized housing.

We are not convinced.

Pajuyo did not profit from his arrangement with Guevarra because Guevarra stayed in the property without
paying any rent. There is also no proof that Pajuyo is a professional squatter who rents out usurped properties
to other squatters. Moreover, it is for the proper government agency to decide who between Pajuyo and
Guevarra qualifies for socialized housing. The only issue that we are addressing is physical possession.

Prior possession is not always a condition sine qua non in ejectment.73 This is one of the distinctions between
forcible entry and unlawful detainer.74 In forcible entry, the plaintiff is deprived of physical possession of his land
or building by means of force, intimidation, threat, strategy or stealth. Thus, he must allege and prove prior
possession.75 But in unlawful detainer, the defendant unlawfully withholds possession after the expiration or
termination of his right to possess under any contract, express or implied. In such a case, prior physical
possession is not required.76

Pajuyos withdrawal of his permission to Guevarra terminated the Kasunduan. Guevarras transient right to
possess the property ended as well. Moreover, it was Pajuyo who was in actual possession of the property
because Guevarra had to seek Pajuyos permission to temporarily hold the property and Guevarra had to
follow the conditions set by Pajuyo in the Kasunduan. Control over the property still rested with Pajuyo and this
is evidence of actual possession.

Pajuyos absence did not affect his actual possession of the disputed property. Possession in the eyes of the
law does not mean that a man has to have his feet on every square meter of the ground before he is deemed
in possession.77 One may acquire possession not only by physical occupation, but also by the fact that a thing
is subject to the action of ones will.78 Actual or physical occupation is not always necessary.79

Ruling on Possession Does not Bind Title to the Land in Dispute

We are aware of our pronouncement in cases where we declared that "squatters and intruders who
clandestinely enter into titled government property cannot, by such act, acquire any legal right to said
property."80 We made this declaration because the person who had title or who had the right to legal
possession over the disputed property was a party in the ejectment suit and that party instituted the case
against squatters or usurpers.

In this case, the owner of the land, which is the government, is not a party to the ejectment case. This
case is between squatters. Had the government participated in this case, the courts could have evicted the
contending squatters, Pajuyo and Guevarra.
Since the party that has title or a better right over the property is not impleaded in this case, we cannot evict on
our own the parties. Such a ruling would discourage squatters from seeking the aid of the courts in settling the
issue of physical possession. Stripping both the plaintiff and the defendant of possession just because they are
squatters would have the same dangerous implications as the application of the principle of pari delicto.
Squatters would then rather settle the issue of physical possession among themselves than seek relief from
the courts if the plaintiff and defendant in the ejectment case would both stand to lose possession of the
disputed property. This would subvert the policy underlying actions for recovery of possession.

Since Pajuyo has in his favor priority in time in holding the property, he is entitled to remain on the
property until a person who has title or a better right lawfully ejects him. Guevarra is certainly not that person.
The ruling in this case, however, does not preclude Pajuyo and Guevarra from introducing evidence and
presenting arguments before the proper administrative agency to establish any right to which they may be
entitled under the law.81

In no way should our ruling in this case be interpreted to condone squatting. The ruling on the issue of
physical possession does not affect title to the property nor constitute a binding and conclusive adjudication on
the merits on the issue of ownership.82 The owner can still go to court to recover lawfully the property from the
person who holds the property without legal title. Our ruling here does not diminish the power of government
agencies, including local governments, to condemn, abate, remove or demolish illegal or unauthorized
structures in accordance with existing laws.

Attorneys Fees and Rentals

The MTC and RTC failed to justify the award of P3,000 attorneys fees to Pajuyo. Attorneys fees as
part of damages are awarded only in the instances enumerated in Article 2208 of the Civil Code.83 Thus, the
award of attorneys fees is the exception rather than the rule.84 Attorneys fees are not awarded every time a
party prevails in a suit because of the policy that no premium should be placed on the right to litigate.85 We
therefore delete the attorneys fees awarded to Pajuyo.

We sustain the P300 monthly rentals the MTC and RTC assessed against Guevarra. Guevarra did not dispute
this factual finding of the two courts. We find the amount reasonable compensation to Pajuyo. The P300
monthly rental is counted from the last demand to vacate, which was on 16 February 1995.

WHEREFORE, we GRANT the petition. The Decision dated 21 June 2000 and Resolution dated 14
December 2000 of the Court of Appeals in CA-G.R. SP No. 43129 are SET ASIDE. The Decision dated 11
November 1996 of the Regional Trial Court of Quezon City, Branch 81 in Civil Case No. Q-96-26943, affirming
the Decision dated 15 December 1995 of the Metropolitan Trial Court of Quezon City, Branch 31 in Civil Case
No. 12432, is REINSTATED with MODIFICATION. The award of attorneys fees is deleted. No costs.

Digest

FACTS
:Petitioner Pajuyo paid P400 to a certain Pedro Perez for the rights over a lot, where Pajuyo subsequently
builta house. In 1985, Pajuyo and private respondent Guevarra executed a Kasunduan wherein Pajuyo
allowedGuevarra to live in the house for free, on the condition that Guevarra would maintain the cleanliness
andorderliness of the house. Guevarra promised that he would vacate the premises upon Pajuyos demand. In
1994, Pajuyo informed Guevarra of his need of the house and demanded that the latter vacate the
house.Guevarra refused. Pajuyo filed an ejectment case against Guevarra before the MTC.Guevarra claimed
that Pajuyo had no valid title over the lot since it is within the area set aside for socializedhousing. MTC
rendered its decision in favor of Pajuyo, which was affirmed by RTC. (MTC and RTC basicallyruled that the
Kasunduan created a legal tie akin to that of a landlord and tenant relationship).CA reversed the RTC decision,
stating that the ejectment case is without legal basis since both Pajuyo andGuevarra illegally occupied the said
lot. CA further stated that both parties are in pari delicto; thus, the courtwill leave them where they are. CA
ruled that the Kasunduan is not a lease contract, but a commodatumbecause the agreement is not for a price
certain.
ISSUE: W/N the contractual relationship between Pajuyo and Guevarra was that of a commodatum

HELD: NO In a contract of commodatum, one of the parties delivers to another something not
consumable so that thelatter may use the same for a certain time and return it. An essential feature of
commodatum is that it isgratuitous.
Another feature of commodatum is that the use of the thing belonging to another is for a certainperiod. Thus,
the bailor cannot demand the return of the thing loaned until after expiration of the periodstipulated, or after
accomplishment of the use for which the commodatum is constituted. If the bailor shouldhave urgent need of
the thing, he may demand its return for temporary use. If the use of the thing is merelytolerated by the bailor,
he can demand the return of the thing at will, in which case the contractual relation iscalled a precarium. Under
the Civil Code, precarium is a kind of commodatum.The Kasunduan reveals that the accommodation accorded
by Pajuyo to Guevarra was not essentiallygratuitous. While the Kasunduan did not require Guevarra to pay
rent, it obligated him to maintain theproperty in good condition. The imposition of this obligation makes the
Kasunduan a contract different from acommodatum. The effects of the Kasunduan are also different from that
of a commodatum. Case law onejectment has treated relationship based on tolerance as one that is akin to a
landlord-tenant relationship where the withdrawal of permission would result in the termination of the lease.
The tenants withholding of the property would then be unlawful.Even assuming that the relationship between
Pajuyo and Guevarra is one of commodatum, Guevarra as baileewould still have the duty to turn over
possession of the property to Pajuyo, the bailor. The obligation to deliveror to return the thing received attaches
to contracts for safekeeping, or contracts of commission,administration and commodatum.70 These contracts
certainly involve the obligation to deliver or return thething received.Guevarra turned his back on the
Kasunduan on the sole ground that like him, Pajuyo is also a squatter.Guevarra should know that there must
be honor even between squatters. Guevarra freely entered into theKasunduan. Guevarra cannot now impugn
the Kasunduan after he had benefited from it. The Kasunduan bindsGuevarra.The Kasunduan is not void for
purposes of determining who between Pajuyo and Guevarra has a right to physical possession of the
contested property. The Kasunduan is the undeniable evidence of Guevarrasrecognition of Pajuyos better
right of physical possession. Guevarra is clearly a possessor in bad faith. Theabsence of a contract would not
yield a different result, as there would still be an implied promise to vacate

G.R. No. L-46240 November 3, 1939

MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants,
vs.
BECK, defendant-appellee.

IMPERIAL, J.:

The plaintiff brought this action to compel the defendant to return her certain furniture which she lent him for his
use. She appealed from the judgment of the Court of First Instance of Manila which ordered that the defendant
return to her the three has heaters and the four electric lamps found in the possession of the Sheriff of said
city, that she call for the other furniture from the said sheriff of Manila at her own expense, and that the fees
which the Sheriff may charge for the deposit of the furniture be paid pro rata by both parties, without
pronouncement as to the costs.
The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar street,
No. 1175. On January 14, 1936, upon the novation of the contract of lease between the plaintiff and the
defendant, the former gratuitously granted to the latter the use of the furniture described in the third paragraph
of the stipulation of facts, subject to the condition that the defendant would return them to the plaintiff upon the
latter's demand. The plaintiff sold the property to Maria Lopez and Rosario Lopez and on September 14, 1936,
these three notified the defendant of the conveyance, giving him sixty days to vacate the premises under one
of the clauses of the contract of lease. There after the plaintiff required the defendant to return all the furniture
transferred to him for them in the house where they were found. On November 5, 1936, the defendant,
through another person, wrote to the plaintiff reiterating that she may call for the furniture in the ground floor of
the house. On the 7th of the same month, the defendant wrote another letter to the plaintiff informing her that
he could not give up the three gas heaters and the four electric lamps because he would use them until the
15th of the same month when the lease in due to expire. The plaintiff refused to get the furniture in view of the
fact that the defendant had declined to make delivery of all of them. On November 15th, before
vacating the house, the defendant deposited with the Sheriff all the furniture belonging to the plaintiff and they
are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in the custody of the said sheriff.

In their seven assigned errors the plaintiffs contend that the trial court incorrectly applied the law: in holding
that they violated the contract by not calling for all the furniture on November 5, 1936, when the defendant
placed them at their disposal; in not ordering the defendant to pay them the value of the furniture in case they
are not delivered; in holding that they should get all the furniture from the Sheriff at their expenses; in ordering
them to pay-half of the expenses claimed by the Sheriff for the deposit of the furniture; in ruling that both
parties should pay their respective legal expenses or the costs; and in denying pay their respective legal
expenses or the costs; and in denying the motions for reconsideration and new trial. To dispose of the case, it
is only necessary to decide whether the defendant complied with his obligation to return the furniture upon the
plaintiff's demand; whether the latter is bound to bear the deposit fees thereof, and whether she is entitled to
the costs of litigation.lawphi1.net

The contract entered into between the parties is one of commadatum, because under it the plaintiff gratuitously
granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract
the defendant bound himself to return the furniture to the plaintiff, upon the latters demand (clause 7 of the
contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code). The obligation voluntarily assumed
by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to
the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely
placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four eletric
lamps. The provisions of article 1169 of the Civil Code cited by counsel for the parties are not squarely
applicable. The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to
comply with her obligation to get the furniture when they were offered to her.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand,
the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the
defendant's behest. The latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff
under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas
heaters and the four electric lamps.

As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment thereof by the
defendant in case of his inability to return some of the furniture because under paragraph 6 of the stipulation of
facts, the defendant has neither agreed to nor admitted the correctness of the said value. Should the
defendant fail to deliver some of the furniture, the value thereof should be latter determined by the trial Court
through evidence which the parties may desire to present.

The costs in both instances should be borne by the defendant because the plaintiff is the prevailing party
(section 487 of the Code of Civil Procedure). The defendant was the one who breached the contract
of commodatum, and without any reason he refused to return and deliver all the furniture upon the plaintiff's
demand. In these circumstances, it is just and equitable that he pay the legal expenses and other judicial costs
which the plaintiff would not have otherwise defrayed.

The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff, in the
residence to return and deliver to the plaintiff, in the residence or house of the latter, all the furniture described
in paragraph 3 of the stipulation of facts Exhibit A. The expenses which may be occasioned by the delivery to
and deposit of the furniture with the Sheriff shall be for the account of the defendant. the defendant shall pay
the costs in both instances. So ordered.

DIGEST

Facts: Quintos and Beck entered into a contract of lease, whereby the latter occupied the formers house. On
Jan 14, 1936, the contract of lease was novated, wherein the QUintos gratuitously granted to Beck the use of
the furniture, subject to the condition that Beck should return the furnitures to Quintos upon demand.
Thereafter, Quintos sold the property to Maria and Rosario Lopez. Beck was notified of the conveyance and
given him 60 days to vacate the premises. IN addition, Quintos required Beck to return all the furniture. Beck
refused to return 3 gas heaters and 4 electric lamps since he would use them until the lease was due to expire.
Quintos refused to get the furniture since Beck had declined to return all of them. Beck deposited all the
furniture belonging to QUintos to the sheriff.

ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos when it deposited the
furnitures to the sheriff.

RULING: The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by
this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand (clause
7 of the contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code). The obligation voluntarily
assumed by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of
them to the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when
he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four
eletric lamps.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand,
the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the
defendant's behest. The latter, as bailee, was nt entitled to place the furniture on deposit; nor was the plaintiff
under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas
heaters and the four electric lamps.

G.R. No. L-17474 October 25, 1962

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
JOSE V. BAGTAS, defendant,
FELICIDAD M. BAGTAS, Administratrix of the Intestate Estate left by the late Jose V. Bagtas, petitioner-
appellant.

PADILLA, J.:

The Court of Appeals certified this case to this Court because only questions of law are raised.

On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal
Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of
P744.46, for a period of one year from 8 May 1948 to 7 May 1949 for breeding purposes subject to a
government charge of breeding fee of 10% of the book value of the bulls. Upon the expiration on 7 May 1949
of the contract, the borrower asked for a renewal for another period of one year. However, the Secretary of
Agriculture and Natural Resources approved a renewal thereof of only one bull for another year from 8 May
1949 to 7 May 1950 and requested the return of the other two. On 25 March 1950 Jose V. Bagtas wrote to the
Director of Animal Industry that he would pay the value of the three bulls. On 17 October 1950 he reiterated his
desire to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor General.
On 19 October 1950 the Director of Animal Industry advised him that the book value of the three bulls could not
be reduced and that they either be returned or their book value paid not later than 31 October 1950. Jose V.
Bagtas failed to pay the book value of the three bulls or to return them. So, on 20 December 1950 in the Court
of First Instance of Manila the Republic of the Philippines commenced an action against him praying that he be
ordered to return the three bulls loaned to him or to pay their book value in the total sum of P3,241.45 and the
unpaid breeding fee in the sum of P199.62, both with interests, and costs; and that other just and equitable
relief be granted in (civil No. 12818).

On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the
bad peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending
appeal he had taken to the Secretary of Agriculture and Natural Resources and the President of the Philippines
from the refusal by the Director of Animal Industry to deduct from the book value of the bulls corresponding
yearly depreciation of 8% from the date of acquisition, to which depreciation the Auditor General did not object,
he could not return the animals nor pay their value and prayed for the dismissal of the complaint.

After hearing, on 30 July 1956 the trial court render judgment

. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total value of the three bulls plus
the breeding fees in the amount of P626.17 with interest on both sums of (at) the legal rate from the
filing of this complaint and costs.

On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted on 18 October
and issued on 11 November 1958. On 2 December 1958 granted an ex-parte motion filed by the plaintiff on
November 1958 for the appointment of a special sheriff to serve the writ outside Manila. Of this order
appointing a special sheriff, on 6 December 1958, Felicidad M. Bagtas, the surviving spouse of the defendant
Jose Bagtas who died on 23 October 1951 and as administratrix of his estate, was notified. On 7 January 1959
she file a motion alleging that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the Bureau
Animal of Industry and that sometime in November 1958 the third bull, the Sahiniwal, died from gunshot wound
inflicted during a Huk raid on Hacienda Felicidad Intal, and praying that the writ of execution be quashed and
that a writ of preliminary injunction be issued. On 31 January 1959 the plaintiff objected to her motion. On 6
February 1959 she filed a reply thereto. On the same day, 6 February, the Court denied her motion. Hence,
this appeal certified by the Court of Appeals to this Court as stated at the beginning of this opinion.

It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late defendant, returned the
Sindhi and Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station, Bureau of Animal Industry,
Bayombong, Nueva Vizcaya, as evidenced by a memorandum receipt signed by the latter (Exhibit 2). That is
why in its objection of 31 January 1959 to the appellant's motion to quash the writ of execution the appellee
prays "that another writ of execution in the sum of P859.53 be issued against the estate of defendant
deceased Jose V. Bagtas." She cannot be held liable for the two bulls which already had been returned to and
received by the appellee.

The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk in November
1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan, where the animal was kept,
and that as such death was due to force majeure she is relieved from the duty of returning the bull or paying its
value to the appellee. The contention is without merit. The loan by the appellee to the late defendant Jose V.
Bagtas of the three bulls for breeding purposes for a period of one year from 8 May 1948 to 7 May 1949, later
on renewed for another year as regards one bull, was subject to the payment by the borrower of breeding fee
of 10% of the book value of the bulls. The appellant contends that the contract was commodatum and that, for
that reason, as the appellee retained ownership or title to the bull it should suffer its loss due to force majeure.
A contract of commodatum is essentially gratuitous.1 If the breeding fee be considered a compensation, then
the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to
the responsibilities of a possessor in bad faith, because she had continued possession of the bull after the
expiry of the contract. And even if the contract be commodatum, still the appellant is liable, because article
1942 of the Civil Code provides that a bailee in a contract of commodatum

. . . is liable for loss of the things, even if it should be through a fortuitous event:
(2) If he keeps it longer than the period stipulated . . .
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of a fortuitous event;
The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for
another period of one year to end on 8 May 1950. But the appellant kept and used the bull until November
1953 when during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the
deceased husband of the appellant the bulls had each an appraised book value, to with: the Sindhi, at
P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not stipulated that in case of loss of
the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

The appellant's contention that the demand or prayer by the appellee for the return of the bull or the payment
of its value being a money claim should be presented or filed in the intestate proceedings of the defendant who
died on 23 October 1951, is not altogether without merit. However, the claim that his civil personality having
ceased to exist the trial court lost jurisdiction over the case against him, is untenable, because section 17 of
Rule 3 of the Rules of Court provides that

After a party dies and the claim is not thereby extinguished, the court shall order, upon proper notice,
the legal representative of the deceased to appear and to be substituted for the deceased, within a
period of thirty (30) days, or within such time as may be granted. . . .

and after the defendant's death on 23 October 1951 his counsel failed to comply with section 16 of Rule 3
which provides that

Whenever a party to a pending case dies . . . it shall be the duty of his attorney to inform the court
promptly of such death . . . and to give the name and residence of the executory administrator,
guardian, or other legal representative of the deceased . . . .

The notice by the probate court and its publication in the Voz de Manila that Felicidad M. Bagtas had been
issue letters of administration of the estate of the late Jose Bagtas and that "all persons having claims for
monopoly against the deceased Jose V. Bagtas, arising from contract express or implied, whether the same be
due, not due, or contingent, for funeral expenses and expenses of the last sickness of the said decedent, and
judgment for monopoly against him, to file said claims with the Clerk of this Court at the City Hall Bldg.,
Highway 54, Quezon City, within six (6) months from the date of the first publication of this order, serving a
copy thereof upon the aforementioned Felicidad M. Bagtas, the appointed administratrix of the estate of the
said deceased," is not a notice to the court and the appellee who were to be notified of the defendant's death in
accordance with the above-quoted rule, and there was no reason for such failure to notify, because the
attorney who appeared for the defendant was the same who represented the administratrix in the special
proceedings instituted for the administration and settlement of his estate. The appellee or its attorney or
representative could not be expected to know of the death of the defendant or of the administration
proceedings of his estate instituted in another court that if the attorney for the deceased defendant did not
notify the plaintiff or its attorney of such death as required by the rule.

As the appellant already had returned the two bulls to the appellee, the estate of the late defendant is only
liable for the sum of P859.63, the value of the bull which has not been returned to the appellee, because it was
killed while in the custody of the administratrix of his estate. This is the amount prayed for by the appellee in its
objection on 31 January 1959 to the motion filed on 7 January 1959 by the appellant for the quashing of the
writ of execution.

Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having
been instituted in the Court of First Instance of Rizal (Q-200), the money judgment rendered in favor of the
appellee cannot be enforced by means of a writ of execution but must be presented to the probate court for
payment by the appellant, the administratrix appointed by the court.

ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as to costs.

Digest
FACTS:

Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for a period of one year for breeding
purposes subject to a government charge of breeding fee of 10% of the book value of the books. Upon the
expiration of the contract, Bagtas asked for a renewal for another one year, however, the Secretary of
Agriculture and Natural Resources approved only the renewal for one bull and other two bulls be returned.
Bagtas then wrote a letter to the Director of Animal Industry that he would pay the value of the three bulls with
a deduction of yearly depreciation. The Director advised him that the value cannot be depreciated and asked
Bagtas to either return the bulls or pay their book value. Bagtas neither paid nor returned the bulls. The
Republic then commenced an action against Bagtas ordering him to return the bulls or pay their book value.

DECISION OF LOWER COURTS: * Trial court: After hearing, the trial Court ruled in favor of the Republic, as
such, the Republic moved ex parte for a writ of execution which the court granted.
INTERVENING FACT: Felicidad Bagtas, the surviving spouse and administrator of Bagtas' estate, returned the
two bulls and filed a motion to quash the writ of execution since one bull cannot be returned for it was killed by
gunshot during a Huk raid. The Court denied her motion hence, this appeal certified by the Court of Appeals
because only questions of law are raised.

ISSUES & RULING: 1. WON the contract was commodatum; WON Bagtas should be held liable for its loss
due to force majeure.

NO, the contract is not commodatum. YES, he is liable for the loss.

A contract of commodatum is essentially gratuitous. Supreme Court held that Bagtas was liable for the loss of
the bull even though it was caused by a fortuitous event. If the contract was one of lease, then the 10%
breeding charge is compensation (rent) for the use of the bull and Bagtas, as lessee, is subject to the
responsibilities of a possessor. He is also in bad faith because he continued to possess the bull even though
the term of the contract has already expired.

If the contract was one of commodatum, he is still liable because: (1) he kept the bull longer than the period
stipulated; and (2) the thing loaned has been delivered with appraisal of its value (10%). No stipulation that in
case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for
another period of one year to end on 8 May 1950. But the appellant kept and used the bull until November
1953 when during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the
deceased husband of the appellant the bulls had each an appraised book value, to with: the Sindhi, at
P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not stipulated that in case of loss of
the bull due to fortuitous event the late husband of the appellant would be exempt from liability.